How life insurers get your best-kept secrets

Some of the things you might hide from friends are fair game to insurers when you apply for life insurance. And thanks to the streams of electronic data available today, life insurance companies can gather information on you faster than ever before. The prescription drugs you’ve taken, that DUI a few years back, a bankruptcy — all these pieces of information will likely come to light and affect your life insurance rates.

Life insurers are increasingly relying on big data resources to speed up the application process and reduce their costs to issue policies.

When you apply, insurers can buy data from a variety of sources. Here’s some of what’s available.

Prescription drug histories

ExamOne, a part of Quest Diagnostics, and Milliman IntelliScript gather prescription claims data from pharmacy benefit managers and sell reports to insurers. Milliman says it can deliver a report within seconds, including the drug name, dosage, fill date, pharmacy and physician information.

The prescription histories sold to life insurance companies probably don’t date back more than about 10 years because it’s been only in the past decade or so that such information has been captured electronically.

Lab test results

With the help of Quest Diagnostics’ clinical laboratory database, ExamOne’s “QuestCheck” service gives insurers results from doctor-ordered lab tests.

Driving record

DUI or reckless driving convictions can make it difficult to qualify for life insurance, and multiple moving violations, such as speeding tickets, in the past few years may make you ineligible for the best prices. Companies such as LexisNexis Risk Solutions and ExamOne offer insurers motor vehicle reports from any state.

Information from previous health and life insurance applications

The MIB Group Inc. has a data-sharing service for its member life and health insurance companies. When you apply for an individual policy, the insurer can share certain pieces of medical information about you with MIB. That information — say, for instance, that you have high blood pressure — is given a code, which other insurers can see if you apply for coverage again. The information is limited; medical records or whether you’ve been declined for coverage are unavailable. MIB has information about you only if you’ve applied for individual life, health, disability, long-term care or critical illness insurance in the past seven years.

Public records

Companies like LexisNexis scan public records to help insurers screen applications. A public records search would turn up a bankruptcy, for instance. A recent bankruptcy, particularly if it’s undischarged, would make it harder to qualify for life insurance with some companies.

Inside the data evaluation process

Almost all life insurers use data collected by MIB, and about six in 10 use prescription databases, lab results and motor vehicle records to help decide whether to issue policies, according to LIMRA, a financial service research group.

Using automated data and algorithms can reduce the need for life insurance medical exams or blood tests as part of the application process, says Timothy Rozar, CEO of RGAx, a subsidiary of Reinsurance Group of America Inc., and a Society of Actuaries fellow.

“It makes the process literally less painful, but also less painful from the time and frustration perspective,” he says.

Already, 48% of life insurance companies surveyed by LIMRA say access to electronic data has reduced the need to order attending physician statements — reports from doctors or hospitals about applicants’ health.

With your permission

All of this is legal. The life insurance application that you sign asks for your consent to collect the information.

The process is consistent with privacy laws such as the Health Insurance Portability and Accountability Act, or HIPAA, and the Fair Credit Reporting Act, says Dennis Moynihan, an ExamOne spokesman.

Evaluating your “risk” as a customer is like putting together a puzzle, LIMRA president and CEO Robert Kerzner says. No single piece of information tells the whole story; rather, each contributes to the big picture.

Information from data reports, such as prescription histories, can speed up approval of most applications, Kerzner says. In a small portion of cases, the reports might reveal discrepancies between what applicants disclosed and the data, prompting the insurer to ask for more information.

“If you said you’re in perfect health and nothing has ever gone wrong, but you’re taking a medication for a condition, then clearly there’s a discrepancy,” Kerzner says.

The data could help you, too, Rozar says. A medication history check could show you’ve been filling a prescription consistently to keep a condition under control, which could help you qualify for coverage.

Why life insurers want to move faster

Life insurance companies see using big data to streamline the process as a key to enticing more people to buy coverage.

When a life insurance medical exam, blood test and attending physician statement are required, it can take 30 days or more to buy a policy. “In today’s world, that doesn’t cut it,” Kerzner says.